How Businesses Can Reduce Peak Demand to Lower Electric Bills
July 3, 2025
For many businesses and manufacturers, electricity is a significant part of your monthly overhead costs. Lowering your electric use can yield big savings, which leaves more money to invest back into the business. Here, we'll explain the nuts and bolts of your electric bill and how to reduce your peak demand for big savings over time.
What is peak demand?
As a business, your electric bill generally has two parts: a usage charge and a demand charge. The usage charge is pretty straightforward. It's based on how much total electricity you use each month and is the kilowatt-hour (kWh) number you will see on your bill. The demand charge is based on your business's highest energy use during a certain time each day and will appear as the Kilowatt (kW) or KVA number on your bill. Your peak demand, and the time it occurs, will depend on the type of work your business does. Peak demand is typically based on your largest energy usage averaged over a 15-minute period.
Understanding your demand charge and how to potentially decrease it will help your business save money. How heavily the demand charge weighs on your total electric bill will depend on how much energy your company uses overall. Efficiency Smart can help you learn more about how this impacts your business.
How can my business reduce its demand charge?
Reducing your baseload electric usage, the amount of electricity your business consumes to power essential systems and machines that run continuously, will lower the usage part of your electric bill. It will also lower your usage during your peak window, which will help reduce your demand charge—a win-win!
To reduce your overall electric usage, consider adding controls to systems that don't need to be running 24/7. Another impactful project is switching to LED lighting. Some of the largest energy and cost savings that Efficiency Smart has seen have come from businesses switching to LED lighting.
When thinking about how to reduce peak demand, start by taking inventory of your biggest equipment. For manufacturers, that might be your air compressor, injection molding machines, or other large equipment. For each machine, think about the basics: What does this machine do? How often does it run? Then consider whether there might be an opportunity to shift how you're using that equipment. Could you add controls to reduce energy consumption when it's not in use? Or could you adjust your manufacturing process to spread the work throughout the day, rather than doing everything all at once? Strategies like those may help reduce your peak demand.
Consider creating a long-term plan for replacing your equipment with more efficient options when the time comes. You can usually tell it's time when your maintenance costs are getting too high. When replacing compressed air systems, start with an air study to see if variable frequency drives (VFDs) can reduce your operating costs. For injection molding machines, look for hybrid or all-electric options. And for HVAC, look for the most efficient option in your price range.
Replacing one or two machines at a time is generally the most cost-effective long-term strategy. Over time, as more equipment is replaced, you'll see the savings adding up on your demand charge.
Learn more about reducing energy use for your business
How can I get started?
An Efficiency Smart expert can help assess opportunities for reducing electric usage in your business. They can also help create an equipment replacement plan, identify rebates to help you save money, and review contractor proposals to make sure you're getting a solid product at a fair price.
Contact your local account manager or our customer support team at (877) 889-3777 or [email protected] to get started.